Jae Hyun Lee is an investor at Northern Light Venture Capital, an early-stage tech VC focused on Asia. Having deep ties to Africa and supporting its entrepreneurial activities, Jae Hyun shares his story and views on the future of African entrepreneurship.1. How did you become interested in African entrepreneurship?
My interest in Africa began serendipitously—seven years ago when I was a student at Harvard, one of the very first friends I made was from Burundi. To be honest, at the time, I probably could not reliably locate Burundi on a map, but my conversations with him got me thinking about how we could add value to the country and the region.
Those conversations led us to co-found YouthGlobe, a non-profit that provides educational and entrepreneurship opportunities to young people in Burundi. We provided high school scholarships, ran after-school programs, and connected our scholars to local employers for internship opportunities.
The education component was not too difficult to execute. Conditions were tough but we had a driven class of scholars and the difference we were making was direct and I could sense it. However, my team and I began to get worried about what would happen after our scholars graduated from high school.2. How were you concerned, and why?
Simply put, I could see that it would be difficult for our scholars to find meaningful employment. Unemployment was very high, and reliable jobs were limited to the UN, international nonprofits, government, and other public sector roles. As is the case in every country, those four sources of employment cannot create meaningful employment for an entire population.
So I was not sure sending our scholars to universities would be the magic solution. What would happen afterwards, and could we make a difference there as well? I was not sure. Historians often point out that the creation of many new universities following independence in various African countries without having a promising economy pressured the government into creating more public sector jobs with limited pay, straining public coffers and breeding an optimal environment for corruption and inefficiency. Every country is different, but I could see a similar dynamic in the communities I worked with.
My team and I thought that the solution was to vitalize the private sector. When a country is in a less developed state, it also means that fast growth is possible because catching up is easier than charting new paths. With this in mind, we sought to educate young talent to start founding businesses that would create value for their communities.
We partnered with the Swiss Agency for International Development to found the YouthGlobe Innovation Center in Northwestern Burundi to train young Burundians to build companies. The center provided digital literacy education, food processing training, and other business skills education with a structured curriculum we developed.3. How has your experience with the YouthGlobe Innovation Center affected how you look at the role of entrepreneurship in developing Africa?
When we started the center, I had a very limited understanding of how entrepreneurship would apply to Burundi. The lack of human talent, technology infrastructure, and capital is a real challenge for the creation of new value. However, I think when you go back to the fundamentals of what is entrepreneurship, there is a direction for progress in any community.
Entrepreneurship is fundamentally about solving a problem through commercial activity. Burundi’s problems were many, and some were more pressing than others. For instance, I don’t think a localized Netflix was what was most needed. Tomatoes were rotting due to lack of refrigeration and proper cold-chain logistics. Schools were importing books and other supplies, which were prohibitively expensive for many. Therefore, in Burundi at the time, a ketchup company and a chalk manufacturer could address real social problems—bring higher quality goods and services at a more reasonable price to consumers. That’s what I was seeing in Burundi, and I think the principle applies more generally.4. Moving beyond Burundi and your personal experience there to all of Africa, how do you think the African entrepreneurship scene is going?
First, Africa is huge and I will say that I am very well aware that the situation in Bujumbura, Burundi is very different from Lagos, Nigeria or Cape Town, South Africa. As a whole though, I think there is a sense that entrepreneurship can and will transform Africa. Venture funding into African startups increased almost fourfold between 2017 and 2018 to USD 725.6 million. While very small compared to the U.S. or China, the upward trajectory here means that investors are beginning to see promise in African entrepreneurship.
More directly, this means that access to capital will become easier. Human capital constraints and infrastructure limitations remain a challenge but there are ways to improve this, through government action and organically by creating successful business cases.5. How exactly will these improvements take place?
Infrastructure is largely up to the government, and includes both physical and non-physical. By physical, I mean reliable power, cheap data, good logistics networks and the like. A big government push can go a long way, and prioritization is necessary but investments into key infrastructure are usually well worth it in the end. Non-physical includes having a robust and reliable legal system in place to protect private property and uphold contracts.
But beyond government efforts, successful business cases can make a difference. Building a new innovation hub like Silicon Valley is difficult, but what often starts it is the success of a few companies that are big and have a real presence. This initial success gets potential founders excited to build companies and lowers the psychological barriers for potential employees to join startups. This was the case in Beijing, Seoul, and Singapore.6. And who do you think can build these successful cases?
In non-American settings, it has often been returnees who led the first wave of entrepreneurship. Anthony Tan and Hooi Ling Tan met at Harvard Business School and returned to Malaysia to start Grab. Bom Kim at Korea’s Coupang also returned from the U.S. to start his social commerce business. Something similar I have observed is the Harambe Entrepreneur Alliance, a network of promising graduates from the world’s leading universities spearheading ventures across Africa. The community, mentorship, and seed funding Harambe and the likes can provide can accelerate Africa’s human capital growth. As these talents return home, build companies, help each other out, and mentor their employees and become role models for many more, the entire ecosystem will grow.
That said, local talent can absolutely develop successful companies. Alibaba’s Jack Ma and Tencent’s Pony Ma are good examples. Whether it is returnees or domestically-educated talent, the emergence of clear success cases can create a culture of optimism that will attract more people towards creative entrepreneurial activities.7. Thank you for sharing your thoughts with us. Is there a final message you would like to leave our readers with?
Two things. First, the entrepreneurial scene in Africa is very young, but the promise is there. I have interacted with many founders and potential founders who want to build to create lasting impact in Africa, and they are all great assets for the continent. Second, various African regions and countries will develop their own ecosystem models. Each region and country faces its unique challenges and undergoes a different process in developing what the ecosystem will eventually look like. China’s model is unlike that of the U.S., and whether it is the UK or Korea or India, eventually it has been domestic talent and domestic capital interacting with other actors like the government and educational institutions to develop its unique innovation landscape. Africa has just begun, and we all await the development of new models throughout the continent.